On the following page, you will find the condensed financial statements for High Inc. and Low Inc. for 2016.

INSTRUCTIONS

1. Compute the following ratios for each company:

a. Rate of return on net sales

b. Rate of return on total assets at year-end

c. Rate of return on stockholders' equity at year-end

d. Earnings per share of common stock

e. Ratio of stockholders' equity to total equities

f. Current ratio

g. Asset turnover

h. Book value per share of common stock

2. Comment on any similarities or differences in the two companies' ratios. When possible, comment on the cause for these differences.

3. From the investor's point of view, is one company more at risk than the other?

4. Would you grant a five-year loan to either company? Explain.

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Income Statements Year Ended December 31, 2016 High Inc. Low Inc. Sales (Net Cost of Goods Sold Gross Pro 5 15 0 0 lo g Expenses Net Income from Operations Interest Net Income before Income Tax Income Tax E Wet Income after Income Tax 1 7 4 5 0 0 125 5 0 o 100 o 0 1 15 5 0 0 28 8 75 8 6 625 1 8 0 0 0 0 0 18 0 0 45 00 0 1 35 0 0 0 Balance Sheets December 31, 2016 High Inc. Low Inc. Assets Current Assets Property, Plant, and Equipment (Net) 13 50 00 1149 00 2060 00 32 09 00 2 3 5 0 00 Total Assets Liabilities and Stockholders Equity Liabilities Current Liabilities Long-Term Liabilities (Bonds Payable) 108500 1 1 00 00 218 500 898 0 0 Total Liabilities 89 8 0 0 Stockholders Equity Common Stock ($10 Par Value) Retained Earnings 30 000 12 15 00 15 1 5 00 3 700 00 3|0|0|0|0 2011 00 2 3 11 00 3209 00 Total Stockholders Equity Total Liabilities and Stockholders' Equity